"I think if the pound had risen, import prices and inflation would have come down more quickly and we would have seen this rebound that came in 2013 more quickly"
- Andrew Sentence, former Bank of England policymaker
Will the course chosen by Mark Carney lead the U.K. economy to a balanced and stable growth or the introduction of his controversial forward guidance can become a massive drag on the economy?
Andrew Sentence, a formed Bank of England policymaker pointed out that central bank's asset purchases accentuated the squeeze on the population's real incomes by holding down the value of the domestic currency. Sentence was one of the MP members between 2006 and 2011. According to his view, the second and the third round of the central bank's 375 billion pounds asset purchase programme, that were launched in October 2011 and the summer of 2012 respectively, had hampered growth rather than boosted it. In a shorter-term stimulus programmes are contributing to the economy, while in case they are lasting for years then policymakers will face a problem of a withdrawal without making a substantial harm to the economy.
Moreover, Sentence believes Carney's decision to keep borrowing costs at 0.5% could see household and companies forced to suffer an interest shock. While his comments goes in contrast with Mark Carney's view on the monetary policy, Sentence is known for being hawkish, hence, a claim for higher interest rates is not a surprise. Nevertheless, the longer the BoE holds its policy, the greater the shock could be when they start raising rates.
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